MBA versus CFA: Which is best for a Finance career?

A question that pops up quite often is: “Should I get an MBA or CFA? Which one is better?”. Now, neither is better than the other. It really depends on your personal circumstances and your personal aspirations!

The answer: It Depends.

The CFA is Purpose-Built for Investment Professionals

In our article what is the CFA and do I need it? we go into detail as to for what purposes a CFA is useful. The CFA – or Chartered Financial Analyst – is a proof of a certain level of mastery of financial analysis. It’s very much focused on becoming a fully-fledged financial professional.

It’s not just a teaching tool, it’s also a validation method of your financial analysis skill set. Practically speaking, it gives you the basic tools you require for investment analysis and is hence most geared towards Analysts and Portfolio Managers for investment firms. Because of the broad scope of the course, it validates and teaches the basic skill set that enables you to work in Venture Capital, Asset Management, Hedge Funds, Private Equity.

Time

Technically you require a university degree (or be working towards one) before you can even take the CFA exams. For what it’s worth, we’ll ignore this as most people considering an MBA will already have a degree.

The Golden Standard of time required for the CFA is 300 hours per level. Given there are 3 levels, that’s an expected 900 hours in total. This is assuming you don’t fail any of the levels! However, it is something you can do next to your work. It will be intense studying 2 hours every day after or before work and ~10 hours in the weekend, but it’s still not as “bad” as having to quit your job.

The main benefit of the CFA’s three-level system is that you can take exams at your own pace. Some people do it in the minimum of 18 months (measured as time between the first and last exam, excluding time spent studying obviously). Others take their time and space years between the levels.

Money

While the CFA is relatively expensive from the perspective of “just a few exams”, it’s ridiculously cheap compared to an MBA. The enrollment fee is $450. Then you have the exam fees of $650-$1,380 for levels 1, 2 and 3 (depending on when you sign-up). Furthermore, most people will use a prep provider in some form. This can cost anywhere from a couple hundred dollars (per level) for study books like SchweserNotes, to THOUSANDS in the case of adaptive learning systems, live classrooms, and 1-on-1 tutoring.

MBA – A Well-Travelled Path

An MBA – or Master in Business Administration – is geared to a much broader audience. It draws candidates from NGOs, Government, Corporates, Tech and Wall Street. Because most MBAs are full-time, it’s focused much more on building a powerful network that you can capitalize on in your career. The idea is that if you go to a top MBA, your classmates are future C-levels, MDs/Partners at Wall St and Big Law Firms, or the next generation of Super-entrepreneurs.

Time

In the US, most MBAs are 2-year full-time commitments. This is a serious commitment which usually also entails relocation. Some MBA candidates are even married with kids; an MBA can be a serious disruption to a family and is definitely not something to sneeze at. In terms of “career time”, MBAs can actually be positive. It is not the case that those two years are automatically lost time – you don’t tend to become the junior of your peer all of a sudden! Because of your network, you may actually get a more senior position than you would have had if you stayed. However, this is a big if and maybe and an MBA is definitely not an assurance to this end.

Money

For many people the cost of an MBA is prohibitive. The cost of an MBA is anywhere from $40K to $80K a year. The total cost of some programs (including housing, excursions etc.) can run up to $200K. In addition, there is also the opportunity cost of foregone salary, and potentially missed years on the career ladder (although many employers will actually offer more senior positions to post-MBA professionals). If you’re on a $100K a year salary, the cost of a 2-year MBA can run up to ~$300K post-tax. Leaving you with either an empty bank account and large student debt.

The Showdown

Whether you should get an MBA or CFA really depends on your goals and where you are currently in life.

Are you an Investment Banker who wants to break into a Hedge Fund or Asset Management? Then a CFA is just a tick in the box. You’re better off spending those 900 hours on PA investing, interviewing and networking. For someone working in Management Consulting, a CFA may be a real enabler to getting a job in Investment Management – because it validates that you actually have the technical skills. With the standardization of recruiting practices these days, this is becoming more and more important.

What stands out here is that these individuals have a goal and the CFA is a method to that achieve that goal (for some – like our Investment Banker – a really inefficient one). This method is not life changing, doesn’t cost the earth, but also won’t radically change your life.

MBAs are in a way the opposite of a CFA. You don’t learn a specialized skill set, it is expensive, and may require life-changing commitments. Most of all, it often leads to a completely different post-MBA work and life. Are you a Corporate manager looking to break into the C-suite? Wall St banker wanting to become Head of TMT M&A? Your network will be key, and an MBA should be hugely beneficial. Also, your MBA may enable you to change careers and/or meet your Co-Founder!

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